Israeli Prime Minister Benjamin Netanyahu on Tuesday agreed to meet Palestinian President Mahmoud Abbas at a summit in Paris next month, a joint effort to overcome the threat of their peace talks collapsing.

A statement from Netanyahu's office said the prime minister had held phone conversations with French President Nicolas Sarkozy and U.S. Secretary of State Hillary Clinton and told them he hoped "positive negotiations" with Abbas would continue.

"I believe with all my heart that we can reach a framework deal within a year and to change the history of the Middle East," Netanyahu said.

He told Sarkozy he accepted his invitation to meet Abbas in Paris in October. No date for that summit has been made public.

The Palestinians held fast to their threat to quit peace talks if Israeli settlement building does not cease.

U.S. Middle East envoy George Mitchell was due to meet Netanyahu on Wednesday and see Abbas also over the coming days to help both sides to find a compromise.

A senior U.S. official, speaking on condition of anonymity, said the United States was not giving up hope that somehow the process could be rescued.

"We're seeing restraint on both sides and we have a few days where we're hoping that we can work through these issues and keep the talks moving forward. I think they are actually listening very intently to what we're telling them," the official in Washington said.

EARLY OCTOBER DECISION?

Abbas also held the door open.

"Of course we don't want to end negotiations, we want to continue. But if colonisation continues we will be forced to end them," he told France's Europe 1 radio.

"We will wait until after a meeting between Palestinians, and an Arab forum meeting on Oct. 4 ... So Netanyahu has a week to decide."

A 10-month moratorium on new housing construction in Israeli settlements in the occupied West Bank expired on Monday after Netanyahu rebuffed calls by U.S. President Barack Obama and other foreign leaders to extend it.

The collapse of a peace process launched at the White House only four weeks ago would be a major political embarrassment for the U.S. leader, who faces the prospect of losses by his Democratic party in congressional mid-term election on Nov. 2.

"The president (Abbas) wants to listen to Mitchell," Palestinian negotiator Nabil Shaath told Reuters. "Maybe the Israelis will reassess their position and see the whole world is against the continuation of settlement activities."

Shaath said that "in reality, there are no negotiations" at present. "There will be no negotiations until Israel halts settlements," Shaath said. "We want to give the Israelis and the Americans a few days."

Netanyahu, who has urged settlers to show restraint, has held out the prospect of limiting the scope of renewed building in the West Bank, land that Israel captured from Jordan in the 1967 war and which Palestinians want as part of a future state.

The Israeli leader's governing coalition is dominated by pro-settler parties. He has described demands for a further building freeze as unacceptable preconditions for talks and said the settlement issue should be decided at the negotiating table.

Since the limited moratorium expired, construction work has resumed at several settlements but there has been little sign of widescale building, during a week-long Jewish holiday when many Israelis are on vacation.

Palestinians fear settlements will deny them a contiguous and viable state.

Netanyahu imposed the freeze on housing starts in the West Bank settlements in November under pressure from Obama to help coax Abbas back into direct talks after a 20-month hiatus.

Nearly 500,000 Jews live in well over 100 settlements established across the West Bank and East Jerusalem. The World Court deems settlements illegal but Israel disputes this. Some 2.5 million Palestinians live in the same areas.